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LNG market in Asia: Record activity in July 2024

In July, the Asian liquefied natural gas (LNG) market recorded record activity, marked by increased transaction dynamics and price fluctuations.

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July saw a significant increase in activity on the physical liquefied natural gas (LNG) market in Asia.
Data from S&P Global Commodity Insights reveals that the total number of offers, requests and transactions reached an annual high, with 282 transactions recorded.
Eight major players, including ADNOC Trading, BP, EnBW, ENN, PetroChina, Glencore, Shell and Vitol, completed twelve transactions representing around 780,000 metric tons of physical LNG cargoes, scheduled for delivery in August, September and October in the Japan-Korea-Taiwan-China region.

Price Fluctuations and Demand Dynamics

Spot LNG prices in Asia fell slightly in July, averaging $12.158/MMBtu versus $12.578/MMBtu in June.
This was due to moderate demand and an abundance of cargoes available on the spot market.
Japan saw a temporary increase in LNG purchases due to high electricity demand caused by a heat wave, but purchases remained limited as utilities had anticipated this situation and prepared their inventories in advance.

Impact of Climate and Geopolitical Conditions

The southern and south-eastern regions of Asia experienced reduced buying interest due to the effects of the monsoon and discouraging price levels for Chinese importers. The shutdown of the Freeport LNG facility on July 7, ahead of Hurricane Beryl, raised concerns.
Damage to the air coolers and the power outage kept feed gas deliveries close to zero for over a week, before repairs were completed in mid-July.

East-West Arbitrage and Derivatives Market Activity

In July, arbitrage opportunities were limited due to narrow spreads between spot LNG prices in Europe and Asia.
Platts valued East-West arbitrage at minus 19.7 cents/MMBtu on August 1.
This reduction is also illustrated by a decrease in the number of bids nominating US base ports in the physical MOC process, from 51.1% in June to 29.7% in July.
The derivatives market also recorded record activity in July, with 1,704 offers, requests and transactions reported, marking an increase of 5.97% on the previous month and more than tripling year-on-year.
A total of 150 transactions for monthly and month-end JKM derivatives were reported by 19 entities, including ADNOC Trading, BP, Dare, DGI, Engie, Glencore, Gunvor, Jera GM, Marubeni, Macquarie, Mercuria, PetroChina, RWE, Shell, Six One Commodities, Total Energies, Trafigura, Unipec and Vitol.
In summary, July 2024 proved to be a key month for the Asian LNG market, characterized by record activity and notable fluctuations in price and demand.
Climatic and geopolitical conditions also had a significant impact, influencing both supply and demand.
This dynamic underlines the growing importance of LNG in the Asian and global energy landscape.

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